Personal finance implies an individual pursuit of financial responsibility.
At least, this was what I thought before I started dating my wife, Maša.
We went to the same high school in Canberra, Australia, but didn’t start dating each other until we were well into our late teens.
Like most high school sweethearts, our growing pains as individuals synchronized with and amplified our growing pains as a couple – after more than a decade spent finessing our best selves and traveling the world together, we finally got our acts together at 32.
It has been quite the journey, but the one thing that has kept haunting us over the last decade was our finances.
Let’s just say that when you combine finances with another human being, things get complicated, especially when you realize somewhere along the way that neither of you are adept at managing money.
Backing out of the relationship was not in the cards, so we needed a monumental paradigm shift to make positive changes in our financial situation.
A turbulent journey in personal finance suddenly turned into a rigorous test of our relationship.
The Beginning of Our Tumultuous Financial Journey
When we were young, we didn’t know what we wanted out of life, let alone have a firm financial plan.
Although we combined finances early on in our relationship, our joint financial decisions were haphazardly made, and neither of us was thinking strategically about money.
I was impulsive, and wanted everything yesterday. I was also weirdly obsessed with only owning brand new stuff.
This meant loading up on new phones, collecting new sneakers, buying video games as soon as they were released, taking on personal loans to buy new vehicles, and getting sucked into interest-free credit cards at appliance stores.
Once when I was 20, I even took out a loan to buy a brand new motorcycle, only to trade it in 10 months later for a faster, newer model. I lost money on the depreciation and the trade-in value, all while refinancing my loan to cover the $3,000 changeover costs. It was crazy!
But the craziest part was how much my wife Maša supported my splurges, perhaps due to the undeniable fact that we were remarkably similar in our spending habits.
Maša grew up in a household where all she knew was how to scrape by and live paycheck to paycheck. So when she finally had some money, her brain immediately went to “great, now let’s spend it all!”
While I was chasing after fast cars, Maša was all about making our home look and feel amazing.
As our apartment began to resemble an IKEA catalogue, our credit cards were also getting maxed out. But I turned a blind eye to it.
To top it all off, we spent big on overseas vacations, and started numerous businesses in our 20s that left us strapped for cash.
One of those businesses was an e-commerce store that sold cruelty-free everyday essentials like baby products and cosmetics. We took out a $10,000 business loan to buy inventory, and hired a lousy marketing agency that charged us $2,200 a month to drive customers to our store through online ads and Search Engine Optimization (SEO).
Long story short, by the time we got ourselves out of the contract with this agency, we were already $6,600 deeper in the hole, with nothing to show for our investment. Of course, the $6,600 was borrowed money.
These decisions left us highly leveraged, with little wiggle room in our budgets. We struggled to make any progress with our debts and couldn’t even afford to make minimum credit card payments on occasions.
Our irresponsible behaviours, mixed with zero financial accountability to each other, culminated in over $20,000 of debts on two separate occasions, not to mention endless arguments and sleepless nights that we could do without.
We knew we had to make some drastic changes.
How We Became a Financially Competent Couple
We didn’t transition from impulsive spenders to money ninjas overnight, but the shift did happen rather quickly.
Here’s what we did to clear our debt, tighten up our personal spending, and start thinking seriously about money.
1. We created a super desirable vision of our life together
Interestingly, the need to get out of debt or to stop making bad financial decisions didn’t compel us to change — otherwise, we would’ve changed our attitude earlier.
It was the desire to be location independent while running our dream online business that got both of us excited about our future.
After operating an e-commerce store while holding full-time jobs burnt us out, we longed for a lifestyle centered around flexibility.
Our ideal business would be one that didn’t need an inventory of physical products, like a monetized blog, so we could make money from anywhere in the world.
With a remote working plan in place, we set our eyes on Slovenia, where Maša was born, as our ideal home base. We printed a photo of the street we want to live on in Ljubljana (the capital city of Slovenia) and hung it up on the back of our bedroom door to keep us motivated.
From that point on, we got more serious about our finances.
2. We began tracking our spending
I have a theory on intuition versus analytics when it comes to money.
It’s the difference between saying “I think we spend about $150 each week on food” and “in the last 3 months, our average weekly food spending was $220.”
To gain clarity on the state of our finances, we used an Australian app called Pocketbook (similar to Mint) that automatically pulls transactions from bank accounts and organizes them into expense categories.
After reviewing 6 months of spending data, we got a rude awakening.
I could’ve sworn I only bought coffee a few times a week, yet the data told me that I spent a whopping $200 a month on take-out coffees. We also had no idea that we were paying $40 per month on various in-app purchases.
It was an insightful exercise to say the least, and something we do to this today to keep ourselves in check.
3. We started using spreadsheets
Once we got a taste of tracking our spending, we took things to the next level.
We created a master Google Sheet that housed our most critical financial information and tools, including:
- Monthly spending trackers
- Minimum viable income calculator
- Debt repayment schedule
- Business income and expenses
At the beginning of each month, my wife and I would sit together to update our spreadsheets and adjust our budget based on expected income and expenses.
For instance, we’re allocating $800 a month to groceries, basic home supplies and bus fares, and cutting back significantly on discretionary expenses like eating out, movies and gas.
Then whatever is left over goes towards savings and debt repayments.
Since our incomes vary from month to month, sometimes we are only able to save $500 a month, while in other months we could add over $3,000 to our savings. But that’s okay as long as we’re making progress.
There’s nothing complicated about our spreadsheets, but being able to track how much we’ve been saving and forecast our debt payoff schedule give us the financial clarity we need.
4. We built an emergency fund
Having an emergency fund (money set aside for emergencies) is a solid piece of financial advice, because it does work.
Once we realized its importance, we rushed to put aside $1,000 as our starter emergency fund.
We actually made it happen in a month after selling some unused furniture and temporarily reducing our debt repayments.
This money would only be used for unforeseen expenses, but having it did give us a small boost in confidence and breathing room after living close to the bone for so long.
Putting Good Financial Habits to Practice
Once our financial foundation had been set, we challenged ourselves to further solidify our finances by translating goals into actions.
Not to pat ourselves too much on the back, but here’s what we did:
When our apartment lease ended, we moved in with my in-laws for 13 months to help pay down our debt faster and start saving money. We cleared $20,000 worth of debt in just 6 months while saving a few thousand dollars.
We took up couponing, enrolled in loyalty programs to earn points, bought discounted food in bulk whenever possible. Maša is now a champion at finding the best deals.
On top of that, we made upwards of $7,000 selling old books, clothes, posters, camera equipment and the car that we no longer need. Going carless is saving us $350 per month when you factor in gas, maintenance, registration fee and insurance premium.
Last but not least, we worked hard to create multiple income sources. Right now, we’re earning money from advertising on our blog, affiliate marketing, book royalties, as well as freelance writing. We like to think of diversifying our income as protecting our downside.
What’s Next For Us
Although we aren’t living in our dream home in Ljubljana yet, we’re incredibly proud of how far we’ve come.
We completely transformed ourselves from a couple of spendthrifts to a power team of responsible budgeters.
The mindset and lifestyle changes we’ve made enabled us to wipe out our debt, build our blog in financial peace, and put plans in motion to achieve our ultimate goal of moving to Slovenia.
If we can do it, so can you!